Homes

Estate planning made easier

In a second marriage? Be careful not to disinherit your kids

When estate planning, the key to avoiding unwanted outcomes, intentional or otherwise, is planning.

Photograph by: Thinkstock
, Postmedia News

Estate planning and what to do with the family home is an emotional issue at the best of times. Add into the mix a second marriage and, perhaps, children from an earlier relationship, and things just get a whole lot more complicated.

"People who are married or who are in long-term common-law relationships tend to hold their home in joint ownership," says Christine van Cauwenberghe, an estate planning specialist with Investors Group in Winnipeg. The spouse will likely be the beneficiary of a will and they in turn would leave the property to their children.

"But in the case of the second marriage, if you're in a relationship where you leave everything to your new spouse, and they don't have any relationship to your children, it's quite likely that you could inadvertently disinherit your children," Ms. van Cauwenberghe says.

The key to avoiding such outcomes, intentional or otherwise, is planning.

"The most important aspect is communication between the two new spouses and between the family members as to what the plans are going forward," says John Bostjancic, financial advisor at Edward Jones in Mississauga. "One of the most important things to try to figure out is how do you deal with your own estate expectations for your own children. What kind of lifestyle and what kind of assets do you want to leave

behind for your spouse and by extension your extended family?"

Mr. Bostjancic says there is no onesize-fits-all solution.

"It depends on life stage. Is it a younger family, perhaps two divorced couples?" Mr. Bostjancic asks. "Or is it an older parent who has remarried and there are larger or a wider array of assets involved?"

"The cleanest way to do it, if you can," Ms. van Cauwenberghe says, "is to divide the estate immediately and let everyone go on their own happy way."

Ms. van Cauwenberghe says particularly if you are not leaving the family home to your spouse, get legal advice to make sure that any will does not violate your spouse's family property rights.

"In respect to homes, [you have to decide] if you want to keep the home in the family or do you want the surviving spouse to stay in that home?" Mr. Bostjancic says. "Do you want to keep the surviving spouse in a certain level of comfort? It becomes a very complex issue, and that's where people tend to procrastinate ... and they end up doing nothing. Inaction is the worst choice."

Ms. van Cauwenberghe says a spousal trust is another option, where your spouse has the income from the assets and use of the home during their lifetime, but on their death it goes to your children. Setting up such trusts needs legal advice. A younger new spouse may even outlive your children meaning your offspring never inherit your property as you had intended.

There may be less problematic alternatives.

"The individual can create a life insurance policy that pays out to the children allowing the second spouse to stay in the home," Mr. Bostjancic says. "Or vice versa, giving the surviving spouse the means to purchase a new home while the children get the benefit of the existing home."

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